in the united states court of federal claims · 5 the damage demands for the manaco timber sale and...

There are two types of contracts at issue in this case: timber sale and multi-product sale.1

Contracts where only sawlogs are required to be harvested are designated “timber sale” contracts.“Sawlogs” are trees larger than 9.0 inches in diameter at breast height (“dbh”). Contracts whereboth sawlogs and roundwood are required to be harvested are designated “multi-product sale”contracts. “Roundwood” refers to smaller trees that are between 5.0 and 8.9 inches dbh. For easeof reference, however, the two contract types will sometimes be referred to collectively as

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In the United States Court of Federal Claims

No. 02-131C

(Filed October 29, 2004)TO BE PUBLISHED

______________________________)

PRECISION PINE & )TIMBER, INC., ) Timber Sale Contracts, Prior Material

) Breach, Contract Disputes Act, 41 U.S.C.Plaintiff, ) § 605, Tucker Act, 28 U.S.C. § 1491,

v. ) Motion to Dismiss, Motion for Summary ) Judgment, Damages

THE UNITED STATES, ))

Defendant. ))

______________________________)

Alan I. Saltman, Saltman & Stevens, P.C., Washington, D.C., for plaintiff. Richard W.Goeken and David J. Craig, Saltman & Stevens, P.C., Washington, D.C., of counsel.

David A. Harrington, Trial Attorney, Kathryn A. Bleecker, Assistant Director, David M.Cohen, Director, Commercial Litigation Branch, Civil Division, Peter D. Keisler, AssistantAttorney General, United States Department of Justice, Washington, D.C., for defendant. LoriPolin Jones and Patricia L. Disert, U.S. Department of Agriculture, Washington, D.C., ofcounsel.

OPINION AND ORDER

GEORGE W. MILLER, Judge.

Plaintiff, Precision Pine & Timber, Incorporated (“Precision”), filed this action onFebruary 15, 2002, alleging that defendant United States Forest Service (“Forest Service”)improperly terminated 12 timber sale contracts for breach. Precision alleged that the Forest1

“timber sale” contracts.

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Service was not entitled to the “estimated” damages it asserted against Precision for the allegedbreaches as set forth in the contracting officers’ final decisions. The Government also asserted acounterclaim seeking the damages determined to be due by the contracting officers as a result ofPrecision’s alleged breaches. On March 10, 2004, the Court ordered that the parties file anydispositive motions simultaneously. On March 25, defendant moved for summary judgment onits counterclaim for damages. The same day, plaintiff moved to dismiss defendant’scounterclaim for lack of subject matter jurisdiction, pursuant to Rule 12(b)(1) of the Rules of theUnited States Court of Federal Claims (“RCFC”), or in the alternative for summary judgmentwith respect to the counterclaim, asserting that the Forest Service failed to comply with the termsof the parties’ contracts in computing damages. The motions were fully briefed by June 3, andoral argument was held on June 14, 2004. For the reasons set forth below, the Court DENIESplaintiff’s motion to dismiss defendant’s counterclaim for lack of jurisdiction. The CourtGRANTS defendant’s motion for summary judgment on its counterclaim to the extent that theCourt holds that, on the undisputed facts, plaintiff breached the contracts. The Court DENIESdefendant’s motion for summary judgment with respect to the computation of damages, andGRANTS plaintiff’s motion for summary judgment with respect to the computation of damagesto the extent that the Court holds that the contracting officers’ computations of damages areinconsistent with the parties’ contracts, and the Court REMANDS the determination of contractdamages to the respective contracting officers for reconsideration pursuant to the methodologythat the Court has determined is required by the parties’ contracts.

FACTS

I. BACKGROUND FACTS

A. Introduction

The following facts are undisputed, unless otherwise noted. Precision Pine & Timber isan Arizona company that purchases federal timber to supply its lumber manufacturingoperations. Pl. Resp. to Def. Mot. for Summ. J. at 9. This action arises out of twelve timber salecontracts awarded to Precision between August 1992 and December 1998 by the United StatesForest Service. Pl. Resp. to Def. Proposed Findings of Uncontroverted Fact (“PRDPF”) at 2. The twelve contracts at issue are O.D. Ridge (Contract No. 001574), Brookbank (Contract No.001822), Jersey Horse (Contract No. 001756), Saginaw-Kennedy (Contract. No. 006585), Brann(Contract No. 006577), U-Bar (Contract No. 005051), Monument (Contract No. 005564),Manaco (Contract No. 004625), Hutch-Boondock (Contract No. 005465), Gentry (Contract No.001939), Wiggins (Contract No. 020012), and Lily (Contract No. 020140).

B. The Government’s Prior Suspensions of the Contracts

On August 24, 1995, the United States District Court for the District of Arizona entered

Nine of the suspended contracts are at issue in this case. Three additional contracts–the2

Gentry, Lily, and Wiggins multi-product sale contracts–are also at issue in this case. They hadnot been executed at the time of the suspensions and, therefore, were not part of the suspensions. Furthermore, of the nine suspended contracts, Chief Judge Damich determined that only eighthad been breached. Precision Pine & Timber, Inc. v. United States, 50 Fed. Cl. 35 (2004). Thesefacts are relevant to determine which contracts are subject to plaintiff’s defense of prior materialbreach, discussed infra.

The suspension of the Manaco Timber Sale was not lifted until March 24, 1997, due to a3

December 10, 1996 discovery of a Mexican Spotted Owl adjacent to the Manaco timber salearea. App. to Def. Mot. at 286.

That case was transferred to the undersigned by order dated January 30, 2004.4

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an order enjoining all timber harvesting on Forest Service timber sales in Region 3 (Arizona andNew Mexico), until the Forest Service complied with its obligations under the EndangeredSpecies Act, 15 U.S.C. § 1531 et. seq., to consult with the United States Fish and WildlifeService (“FWS”) regarding the impact of Forest Service’s Land and Resource Management Planson the Mexican Spotted Owl. Silver v. Babbitt, 924 F. Supp. 976, 989 (D. Ariz. 1995). Thisinjunction caused the Forest Service to suspend 14 timber sale contracts that it had entered intowith Precision. The suspensions were lifted as to the Brann and Hutch-Boondock multi-product2

sales on October 25, 1995. See App. to Def. Mot. at 3-4, 24. The Arizona district court liftedmost of the remaining suspensions on or about December 4, 1996. PRDPF at 8; Precision Pine3

& Timber v. United States, 50 Fed. Cl. 35, 51 (2001).

Throughout the suspension, Precision informed the Forest Service that it considered theForest Service to have breached the contracts. Pl. Resp. at 10 (citing Pl. Proposed Findings ofUncontroverted Facts (“PPFUF”) 1-2). At the conclusion of the suspensions, Precisionsubmitted claim letters to the cognizant contracting officers at the Forest Service. Pl. Resp. at 11. In the letters, Precision sought to recover several million dollars in damages. Id. at n.3. OnSeptember 11, 1998, in response to the contracting officers’ decision to award Precision only$18,242.78 as compensation, rather than the several million dollars to which Precision claimed itwas entitled, Precision filed an action against the United States in this Court. Id. n.3. That actionwas docketed as 98-702C. In that action, Precision alleged that the suspensions constitutedbreaches of the contracts and claimed entitlement to damages. See Precision Pine, 50 Fed. Cl.35.

On July 30, 2001, in resolving a motion for summary judgment, Chief Judge Damich, towhom 98-720C was assigned , found that the Forest Service had breached eight of the suspended4

contracts at issue in this case: O.D. Ridge, Brookbank, Jersey Horse, Saginaw-Kennedy, Brann,U-Bar, Monument, and Manaco. Id. at 74. The court determined that the Forest Service’ssuspension of the Hutch-Boondock multi-product sale contract did not result in a breach. Id. The court found the Forest Service had breached its implied duty to cooperate with respect to the

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Monument, Saginaw-Kennedy, Brann, Manaco, and Brookbank contracts. Id. Additionally, thecourt found, with respect to all but the Hutch-Boondock and Brann contracts, that thesuspensions breached the Forest Service’s implied duty not to hinder Precision’s performance. Id. at 72. “[T]he length of the suspensions was both unreasonable and wrongfully caused by theForest Service, and . . . [Precision’s] operations were significantly hindered.” Id. The 98-720Caction is ongoing at the time of this opinion, with the issue of damages still to be determinated. Id. at 73.

C. Current Dispute

The current dispute between Precision and the Forest Service arose during the summer of2000, after Precision’s failure to obtain a surety acceptable to the Government. PRDPF at 13-17. On June 6, 2000, the Department of the Treasury issued a notice that Frontier InsuranceCompany (“Frontier Insurance”), Precision’s then surety, no longer qualified as an acceptablesurety on federal bonds. Id. at 13. The notice stated, “With respect to any bonds, includingcontinuous bonds, currently in force with [Frontier Insurance], bond-approving officers shouldsecure new bonds with acceptable sureties in those instances where a significant amount ofliability remains outstanding. In addition, in no event are bonds that are continuous in nature tobe renewed.” 65 Fed. Reg. 35998-02 (June 6, 2000). Between June 9, 2000 and June 21, 2000,contracting officers sent letters notifying Precision that Frontier Insurance was no longer listed bythe Department of Treasury as an acceptable surety for federal bonding. PRDPF at 13-14. Inthose letters the Forest Service also informed Precision that failure to obtain an acceptable suretywas a breach of the contract that it had thirty days to remedy. Id.

Precision Pine failed to obtain an acceptable surety. Id. at 14. As a result, during July2000, the Forest Service sent Precision a “Notice of Breach” regarding each of the 12 contracts. Id. at 15. The Notices stated the Forest Service’s position that the failure to obtain an acceptablereplacement surety constituted a “material breach.” App. to Def. Mot. at 96-99, 168-69, 238-43,333, 455-56. Precision was again given thirty days to remedy the breach. Id. From lateSeptember to early October, the contracting officers sent Precision a “final notice” regardingPrecision’s “material breach”and means of remedy. Id. at 107-08, 172-73, 251-52, 341-42, 457-58. Precision was again given thirty days to remedy the situation after which time the “contracts[were to be] terminated for breach.” Id. By letter dated January 9, 2001, the Forest ServiceRegional Forester terminated the contracts at issue for breach pursuant to section CT9.3(E) of thecontracts. PRDPF at 17. The termination letter stated:

Not only have you had the time granted under the terms of the contract to rectify thesituation, but you were also given more than 50 additional calendar days to comply withthe terms of your contracts. In addition, you were presented with the opportunity tounburden yourself of these contracts, without the assessment of damages, through mutualcancellation at our recent settlement discussions.

Id.

The damage demands for the Manaco Timber Sale and the Brookbank Multi-Product5

Sale were zero. See App. to Pl. Mot. at 78-79, 125-126.

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Three days after the termination, on January 12, 2001, counsel for Precision sent a letteradvising the Forest Service that Precision considered the Government’s prior material breach tohave relieved it of liability for the “putative defaults” and reserved its right to make this argumentonce the issue of the Government’s breach was resolved by the court in Precision Pine & Timber,Inc. v. United States, No. 98-720C. Pl. Proposed Findings of Uncontroverted Fact in Supp. of itsResp. to Def. Mot. for Summ. J. at 4-5. On September 17, 2001, just over a month afterresolution of the issue of breach in 98-720C, the President of Precision sent a letter to the ForestService stating his belief that the court’s determination that the contracts had been materiallybreached relieved Precision of any liability for its putative defaults. Id. at 5. The letter stated:

[T]he Forest Service is scrupulously choosing to ignore the black letter law that a pre-existing material breach of contract, such as the Court of Federal Claims found the ForestService committed on our sale, precludes a subsequent finding of default by PrecisionPine.

Id. On September 28, 2001, Precision sent another letter, this time to the Washington Office ofthe Forest Service, taking the same position with respect to the Forest Service’s prior materialbreach. Id. at 5-6.

From late February to early April 2001, the Forest Service sent packets regarding itsdamage claims to Precision. App. to Pl. Mot. at 12-127. Each packet contained a “DecisionDocument,” a “Default Damage Calculations” statement, and a “Bill for Collection.” Id. In thesection of the packet labeled “Decision Document,” the contracting officer explained, “Thisdocuments the Contracting Officer’s Decision regarding a claim under the Contract Disputes Actby the United States Government against Precision Pine & Timber, Inc. for [a specific sum] forits default of the [timber sale contract].” Id. at 13, 23, 32, 42, 51, 60, 78, 88, 100, 112, 125. Furthermore, the Decision Document stated, “This estimate may be adjusted once final damagesare determined following the resale of the remaining timber. At that time any surplus damagescollected by this estimate will be refunded to the purchaser, or any additional damages due willbe collected, as appropriate.” Id. at 14, 24, 33, 43, 52, 60-61, 79, 89, 101, 113 . In conclusion5

the Decision Document stated, “This is the final decision of the Contracting Officer. Thisdecision may be appealed to the Agriculture Board of Contract Appeals . . . within 90 days fromthe date you receive this decision.” Id. at 15, 25, 34, 44, 53, 62, 80, 90, 102, 114.

The first page of the “Default Damage Calculations” statement explained that the“calculation of estimated damages due the United States” was “[b]ased on procedures andapplicable costs described in provision CT9.4” of the timber sale contract. Id. at 16, 26, 35, 54,63, 81, 94, 105, 115. The first page’s summary explanation was followed by detailedcalculations of the remaining timber, the cost of resale, the interest on remaining contract value,

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and the calculation of resale value. Id. at 17-19, 27-28, 36-37, 45-46, 54-56, 64-65, 82-84, 94-96, 105-107, 115-117. The final page in each packet’s damage calculation statement on was anitemization of the damages and credits, with the last two lines showing the “Estimated DamagesDue Government” and “Refund Due Purchaser.” Id. at 20, 29, 38, 47, 57, 66, 85, 97, 108, 118. Last, the packets contained a “Bill for Collection.” Id. at 22, 31, 40, 50, 59, 68, 87, 99, 110, 123. The Bill simply restated the amount due to the Government, the due date, and the description“[Contract Name] Default.” Id.

The estimated damages demanded by the Forest Service totaled $767,652.72. They breakdown by contract as follows:

Sale Contract Forest Service’s estimated damages

O.D. Ridge Timber Sale $148,845.38

Jersey Horse Timber Sale $ 9,035.47

Saginaw-Kennedy Timber Sale $101,642.20

Brann Timber Sale $ 36,888.97

U-Bar Timber Sale $215,691.04

Monument Multi-Product Sale $ 81,477.88

Hutch-Boondock Multi-Product Sale $ 2,278.72

Gentry Multi-Product Sale $ 92,236.78

Wiggins Multi-Product Sale $ 13,016.93

Lily Timber Sale $ 66,512.35

Brookbank Multi-Product Sale $0

Manaco Timber Sale $0

Pl. Mot at 4.

D. Relevant Contract Terms

The Federal Acquisition Regulation (“FAR”) does not apply to timber sale contractsbecause the Government in not “acquiring,” but rather, is selling timber. Each of the contracts,however, contained substantially similar terms. The following sections of the contracts arerelevant to this action:

CT9.2 - DISPUTES.***

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(b) Except as provided in the [Contract Disputes] Act, all disputes arising under orrelating to this contract shall be resolved in accordance with this clause.

(c)(i) As used herein, “claim” means a written demand or assertion by one of theparties seeking, as a legal right, the payment of money, adjustment orinterpretation of contract terms, or other relief, arising under or relating to thiscontract.

(c)(ii) A voucher, invoice, or request for payment that is not in dispute whensubmitted is not a claim for the purposes of the Act. However, where suchsubmission is subsequently not acted upon in a reasonable time, or disputed eitheras to liability or amount, it may be converted to a claim pursuant to the Act.

(c)(iii) A claim by the contractor shall be made in writing and submitted to theContracting Officer for decision. A claim by the Government against thecontractor shall be subject to a decision by the Contracting Officer.

***

CT9.3 - BREACH. The Contracting Officer, with the concurrence of the RegionalForester, may terminate this contract for breach in the event Purchaser:

***E. Fails to remedy a breach of contract within time limits stated in BT9.3.

Damages due the United States for termination under this provision shall be determinedpursuant to CT9.4.

CT9.4 - FAILURE TO CUT. In the event of (a) termination for breach or (b)Purchaser’s failure to cut designated timber on portions of Sale Area by TerminationDate, Forest Service shall appraise remaining Included Timber . . . . Such appraisal shallbe made with the standard Forest Service method in use at time of termination.

Damages due the United States for Purchaser’s failure to cut and remove Included Timbermeeting Utilization Standards shall be the amount by which Current Contract Value, pluscosts described below, less any Effective Purchaser Credit remaining at time oftermination, exceeds the resale value at new Bid Rates. If there is no resale, damages dueshall be determined by subtracting the value established by said appraisal from thedifference between Current Contract Value and unused Effective Purchaser Credit, plusany of the following applicable costs:

(a) The cost of resale or reoffering;

(b) Any increase in Purchaser Credit Limit allowance for Unconstructed Specified

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Road facilities which are needed to harvest the remaining uncut volume. Suchincreases are limited to costs for constructing the road to the same standard andspecifications required by this contract;

(c) If Purchaser has failed to cut individual trees in the portions of Sale Areacutover and there is no resale of such individual trees, Purchaser shall pay ForestService for cost of felling and removal or otherwise eliminating such uncut treesin addition to payment of damages described above . . . ;

(d) The Government’s loss caused by the delay in receipt of stumpage payments. Such loss will be measured by interest at the current rate being paid for borrowingby the United States (as calculated and published by the Treasury Department inTFRM 6-8025.2) on the unpaid contract value at Termination Date. Interest willbe charged for the total number of months, or portions thereof from TerminationDate until midpoint of the contract resale period, less any time in excess of 1 yearneeded to make the resale;

(e) Any increase in reforestation costs, including site preparation, seeding, andplanting caused by Purchaser’s failure to harvest Included Timber by TerminationDate.

See App. to Pl. Mot. at 3-8.

DISCUSSION

II. Motion to Dismiss Counterclaim for Lack of Subject Matter Jurisdiction

A. Standard for Motion to Dismiss

Precision has moved to dismiss the Government’s counterclaim, alleging that the ForestService failed to take the steps necessary to establish jurisdiction in the Court of Federal Claimsover its claim against Precision arising under the Contract Disputes Act (“CDA”), 41 U.S.C. § 601 et seq. Pursuant to RCFC 12(b)(1), the Court is required to grant plaintiff’s motion todismiss if it finds that the Court does not possess jurisdiction over the defendant’s counterclaim. Once jurisdiction is challenged, the non-moving party bears the burden of establishingjurisdiction. Holland v. United States, 57 Fed. Cl. 540, 550 (2003) (citing McNutt v. Gen.Motors Acceptance Corp. of Ind., 298 U.S. 178, 189 (1936)). When deciding a motion todismiss, this Court must assume that all undisputed facts alleged by the non-moving party aretrue and must draw all reasonable inferences in the non-movant’s favor. Mexican IntermodalEquipment, S.A. de C.V. v. United States, 61 Fed. Cl. 55, 59 (2004) (citing Scheuer v. Rhodes,416 U.S. 232, 236 (1974)). Additionally, “the court may consider all relevant evidence in orderto resolve the factual dispute, including evidentiary matter outside the pleadings.” Wilson v.United States, 58 Fed. Cl. 760, 762 (2003) (citing Indium Corp. of America v. Semi-Alloys, Inc.,781 F.2d 879, 884 (Fed. Cir. 1985)). “The issue is not whether a plaintiff will ultimately prevail

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but whether the claimant is entitled to offer evidence to support the claims.” Id. at 761-62 (citingScheuer, 416 U.S. at 236).

B. The Forest Service Demand for Damages Constitutes a Claim

The United States Court of Federal Claims is a court of specific and limited jurisdiction. United States v. King, 395 U.S. 1, 3 (1969); American Maritime Trans., Inc. v. United States, 870F.2d 1559, 1563 (Fed. Cir. 1989). The Tucker Act grants this Court “jurisdiction to renderjudgment upon any claim against the United States founded upon . . . any Act of Congress or anyregulation of an executive department, or upon any express or implied contract with the UnitedStates, or for liquidated or unliquidated damages in cases not sounding in tort.” 28 U.S.C. §1491(a)(1) (2000). Furthermore, the Court “shall have jurisdiction to render judgment upon anyclaim by or against, or dispute with, a contractor arising under section 10(a)(1) of the ContractDisputes Act of 1978 . . . on which a decision of the contracting officer has been issued under [41U.S.C. § 605 (2000)].” 28 U.S.C. § 1491(b).

The CDA distinguishes between claims by a contractor and claims by the Government. See 41 U.S.C. § 605. “All claims by a contractor against the government [must] be in writingand shall be submitted to the contracting officer for a decision.” 41 U.S.C. § 605(a). Contractorclaims in excess of $100,000 must be certified as to accuracy by a duly authorized representativeof the contractor. 41 U.S.C. § 605(b). On the other hand, “claims by the government against acontractor” need only “be the subject of a decision by the contracting officer.” 41 U.S.C. §605(a). No formal submission and no certification is required for Government claims. PlacewayConstr. Corp. v. United States, 920 F.2d 903, 906 (Fed. Cir. 1990). The language in section605(a) “has been construed to require a ‘final decision’ on a claim by the contracting officer as a‘jurisdictional prerequisite’ to further legal action.” Ervin and Assocs. v. United States, 44 Fed.Cl. 646, 653 (1999) (quoting Sharman Company, Inc. v. United States, 2 F.3d 1564, 1568 (Fed.Cir. 1993)); see Paragon Energy Corp. v. United States, 227 Ct. Cl. 176, 645 F.2d 966, 967(1981); see also Bath Iron Works Corp. v. United States, 20 F.3d 1567, 1578-79 (Fed. Cir. 1994).

The Forest Service contracting officers issued what purported to be final decisionsassessing default damages with respect to each of the contracts at issue. See Compl. ¶¶ 28, 36,43, 51, 58, 65, 72, 79, 86, 91, 96, 102; Pl. Mot. at 3-4; see also PA 12-137. These final decisionswere in writing, stated the reasons for the decision, informed Precision Pine of its right to appeal,were furnished to Precision, and pre-date the filing of this action. PA 12-137. Thus, finaldecisions addressing “the subject of” the Government’s counterclaim were issued in accordancewith the CDA. See 41 U.S.C. § 605(a).

1. Dawco and Reflectone

Precision contends that the contracting officers’ final decisions are neverthelessinsufficient to confer jurisdiction over defendant’s counterclaim on the court. Pl. Mot. at 1. According to Precision, the final decisions do not address a Government “claim” because theamount of breach damages was not “in dispute” when the decisions were issued. See Pl. Mot. at

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7. Precision’s argument has been rejected by the United States Court of Appeals for the FederalCircuit, is contrary to the ordinary meaning of “claim,” is unsupported by the legislative historyand purposes of the CDA, and is belied by the language of the respective timber sale contracts.

Overruling Dawco Constr., Inc. v. United States, 930 F.3d 872 (Fed. Cir. 1991), and “itsprogeny,” the Federal Circuit held in Reflectone, Inc. v. Dalton, that a non-routine submissionfrom a contractor constitutes a “claim” regardless of whether it is preceded by a dispute. 60 F.3d1572, 1575-76 (Fed. Cir. 1995) (en banc). The assertion of damages resulting from a breach ofcontract is not routine. See Kentucky Dam & Bridge, Inc. v. United States, 42 Fed. Cl. 501, 519(1998). Consequently, even assuming for the sake of argument that the “in dispute” requirementcould apply to a Government claim, despite the fact that Government claims are not “submitted”but rather are “the subject of a decision,” under Reflectone the existence of a pre-existing disputeis irrelevant.

Precision attempts to resurrect Dawco’s “in dispute” requirement. Pl. Mot. at 7-8. As inReflectone, the decision in Dawco concerned submissions by contractors – not a Governmentclaim. See 930 F.2d at 877. Moreover, like Reflectone, the decision in Dawco was based uponprovisions of the FAR. See id. at 877-78 (concluding that the FAR “mandates . . . a dispute atthe time of submission”). Precision’s assertion that Dawco created “an all-ecompassing ‘indispute’ requirement” applicable to Government claims or contracts not governed by the FAR issimply incorrect. See Pl. Mot. at 8. Moreover, the only aspect of the “in dispute” holding ofDawco that survives Reflectone pertains to “routine” submissions from the contractor. Dawcoand its progeny are, therefore, inapposite.

2. Ordinary Meaning of the Term “Claim”

The CDA does not define what constitutes a “claim.” Dawco, 930 F.2d at 877, overruledon other grounds by Reflectone, 60 F.3d 1572. The ambiguity has been especially noted in casesinvolving a government claim. Volmar Constr., Inc. v. United States, 32 Fed. Cl. 746, 751(1995). This court has dealt with any contested claim by evaluating it in terms of the regulationsimplementing the Act, the relevant contract language, and the facts of the case. Id. (citingDawco, 930 F.2d at 877). The FAR, which governs the Government’s conduct of procurements,defines “claim” as:

[1] a written demand or written assertion by one of the contracting parties seeking, as amatter of right, the payment of money in a sum certain, the adjustment or interpretation ofcontract terms, or other relief arising under or relating to the contract . . . [2] A voucher,invoice, or other routine request for payment that is not in dispute when submitted is not aclaim. [3] The submission may be converted to a claim, by written notice to thecontracting officer as provided in 33.206(a), if it is disputed either as to liability oramount or is not acted upon in a reasonable time.

48 C.F.R. § 2.101. As noted above, however, the FAR does not apply to timber sale contractsbecause the Government is not “acquiring,” but rather, is selling timber. The jurisdictional

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question raised by plaintiff is whether the Government’s counterclaim for damages is a “claim”within the meaning of the CDA. More specifically, Precision asserts that the Forest Service’sassessments of damages were not “in dispute,” as purportedly required by the contracts’definition of claim as set forth in section CT9.2(c), and therefore did not constitute finaldecisions upon which a CDA claim could be based. Pl. Mot. at 4. Because the FAR does notapply to the contracts, the Court must look first to the language of the CDA and then the specificfacts of this case to determine whether the contracting officers’ decisions were “claims” forpurposes of the CDA.

“The starting point for statutory interpretation is the plain language of the statute.” ZoltekCorp. v. United States, 51 Fed. Cl. 829, 834 (2002). Section 1491 of title 28 grants this Court“jurisdiction to render judgment upon any claim by or against, or dispute with, a contractorarising under section 10(a)(1) of the Contract Disputes Act of 1978 . . . on which a decision ofthe contracting officer has been issued under [41 U.S.C. § 605].” 28 U.S.C. § 1491(a)(1)(emphasis added). First, the Court must determine whether there was a “claim” against thecontractor. Neither the Tucker Act nor the CDA define the term “claim,” and the FAR’sdefinition of claim does not apply to these contracts. Accordingly, the Court must look to theordinary meaning of the term. Claim has been defined as: “A demand for something as due; anassertion of a right to something.” III OXFORD ENGLISH DICTIONARY 261 (2d ed. 1989); see alsoReflectone, 60 F.3d at 1576 (quoting WEBSTER’S NINTH NEW COLLEGIATE DICTIONARY 244(1990)) (“a demand for something due or believed to be due”). Moreover, as the Federal Circuithas explained, the ordinary meaning does not require any pre-existing dispute:

[Construing the term] “claim” to be a written demand seeking a sumcertain (or other contract relief) as a matter of right, but not necessarilyin dispute, is consistent with the ordinary meaning of the term “claim”:“a demand for something due or believed to be due.” WEBSTER’S NINTH

NEW COLLEGIATE DICTIONARY 244 (1990). That the demand is made as a matter of right constitutes the essential characteristic of a claim according to both the FAR and the dictionary definitions. Nothing in the common definition of “claim,” however, requires a pre-existing dispute before a demand as a matter of right can be a claim. Indeed,everything suggests the contrary.

Reflectone, 60 F.3d at 1576 (case citations omitted). The Federal Circuit noted additionally, that“it is illogical to require a dispute before a demand for payment rightfully due can be a ‘claim’because to have a dispute the contractor must first make a demand as a matter of right, i.e., aclaim, that is then refused.” Id.

The Forest Service contracting officers’ final decisions assess as a matter of rightdamages for breach of contract. See PA 12-127. By demanding “something due or believed tobe due,” the final decisions assert a government “claim.” Reflectone, 60 F.3d at 1576; see alsoPlaceway, 920 F.2d at 906.

http://web2.westlaw.com/find/default.wl?DB=613&SerialNum=1998176958&FindType=Y&ReferencePositionType=S&ReferencePosition=595&AP=&RS=WLW4.06&VR=2.0&FN=_top&SV=Split&MT=FederalGovernment

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3. The CDA’s Legislative History and Purposes Are NotConsistent With an “In Dispute” Requirement

“[N]either the CDA, its legislative history, nor the FAR, nor its history, suggests that adispute must pre-date the contractor’s submission of the claim to the CO when the claim is in theform of a non-routine demand as of right.” Reflectone, 60 F.3d at 1576. Additionally, theCDA’s goal of “providing for the efficient and fair resolution of contract claims” conflicts with apre-existing dispute requirement. Id. at 1580 (citing Report of the Senate Government AffairsComm. and the Senate Judiciary Comm. on the Contract Disputes Act of 1978, S. REP. NO. 95-1118, at 4 (1978), reprinted in 1978 U.S.S.C.A.N. 5235, 5238). As the Federal Circuit explainedin Reflectone:

Judicial inquiries into whether a dispute predated a submission are at best an inefficient use of limited resources, given that before theBoard or the court reaches this question there will necessarily have been a final CO’s decision denying the contractor’s submission . . . .Because a dispute clearly exists at the time an appeal is dismissed for lack of a dispute pre-dating submission of the demand for payment tothe CO, after dismissal the contractor need only resubmit the identicaldemand to the CO. The resubmitted demand would now indisputablysatisfy the pre-existing dispute requirement and, therefore, be a CDA claim. The process of final decision and appeal would begin all overagain, but at great cost to the parties, the boards and the courts, oftenwith no benefit because the disputed issues on the merits have already been well defined by the course of litigation. Clearly this repetitive and needlessly drawn-out process can hardly be said to promote the efficientresolution of claims. Nor is it “fair.” Requiring . . . the identical claim[to be submitted twice] is a waste . . . of time and money.

60 F.3d at 1580-81.

That is precisely the situation here. If the Government’s claims were to be dismissed, thecontracting officers would issue new final decisions assessing breach damages. The existence ofa pre-existing dispute would clearly be satisfied. Precision would then once again challenge theassessment of breach damages. The CDA’s goal of the fair and efficient resolution of claims, aswell as the interests of judicial economy, would be undermined by such a result.

4. The Contractual Language Does Not Impose an “In Dispute” Requirement

The parties’ written agreements in this case embodied and recognized the Court’sjurisdiction granted by Congress to hear claims arising pursuant to the CDA. Precision disputedthe Court’s jurisdiction, arguing that the Forest Service’s actions did not meet the contractualdefinition of “claim.” Plaintiff, however, has incorrectly interpreted the contracts. Rather thanlimiting the Court’s jurisdiction, the language of the contracts is consistent with the Court’s

13

interpretation of 28 U.S.C. § 1491(a) and the CDA.

Interpretation of the terms of a government contract is a matter of law. FortecConstructors v. United States, 760 F.2d 1288, 1291 (Fed. Cir. 1985). Therefore, it is proper forthis Court to engage in contract interpretation on a motion to dismiss. S. Cal. Edison v. UnitedStates, 58 Fed. Cl. 313, 321 (2003) (citing Kennedy Heights Apartments, Ltd. I v. United States,48 Fed. Cl. 574, 578 (2001)). “The interpretation of a contract ‘begins with the language of thewritten agreement.’” S. Cal. Edison, 58 Fed. Cl. at 321 (quoting Coast Fed. Bank, FSB v. UnitedStates, 323 F.3d 1035, 1038 (Fed. Cir. 2003)). It is a well-established principle of contractinterpretation that “the language of a contract must be given that meaning that would be derivedfrom the contract by a reasonably intelligent person acquainted with the contemporaneouscircumstances.” Hol-Gar Mfg. Corp. v. United States, 169 Ct. Cl. 384, 351 F.2d 972, 975 (1965). Furthermore, “an interpretation [that] gives a reasonable meaning to all parts [of a contract] willbe preferred to one which leaves a portion of it useless, inexplicable, inoperative, void,insignificant, meaningless, superfluous, or achieves a weird and whimsical result.” NorthropGrumman, 50 Fed. Cl. 443, 459 (2001) (quoting Arizona v. United States, 216 Ct. Cl. 221, 235,575 F.2d 855, 863 (1978)).

The relevant language governing claims is found in section CT9.2(c) of the contract:

(c)(i) As used herein, “claim” means a written demand or assertion by one of the partiesseeking, as a legal right, the payment of money, adjustment or interpretation of contractterms, or other relief, arising under or relating to this contract.

(c)(ii) A voucher, invoice, or request for payment that is not in dispute when submitted isnot a claim for the purposes of the Act. However, where such submission is subsequentlynot acted upon in a reasonable time, or disputed either as to liability or amount it may beconverted to a claim pursuant to the Act.

(c)(iii) A claim by the contractor shall be made in writing and submitted to theContracting Officer for decision. A claim by the Government against the contractor shall be subject to a decision by the Contracting Officer.

As the Government noted at oral argument, the determinative distinction in thecontractual language for establishing the damage demands as claims lies in the differencebetween the words “demand” and “request” used in subsections CT9.2(c)(i) and CT9.2(c)(ii)respectively. The parties necessarily intended the two provisions to have different meanings,otherwise there would have been no need for different clauses. Subsection (c)(i) defines the term“claim.” There is no “in dispute” requirement included in that definition. Section (c)(ii) carvesout a subset of actions that are not “claims” unless they are “in dispute.” By ignoring thedistinction between demand and request, Precision improperly seeks to add an “in dispute”requirement to the definition of claim found in subsection (c)(i).

http://web2.westlaw.com/find/default.wl?DB=1004365&DocName=USFCLCTR12&FindType=L&AP=&RS=WLW4.05&VR=2.0&FN=_top&SV=Split&MT=Westlaw










































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In order to ascertain the purpose of this distinction we turn to the plain meaning of thedifferent terms. As implied by CT9.2(c)(i)’s qualifying words, “as a legal right,” demand means“to ask for (a thing) with legal right or authority; to claim something one is legally entitled to.” IV OXFORD ENGLISH DICTIONARY 430; WEBSTER’S NINTH NEW COLLEGIATE DICTIONARY 244(1990). On the other hand, request means “to express a wish or desire to have.” XII OXFORD

ENGLISH DICTIONARY 679. Read in accordance with the ordinary meaning of “demand,” thedamage calculations sent by the Forest Service were demands seeking, as a legal right, thepayment of money, rather than requests for payment.

Although plaintiff asserts that the damages demanded by the Forest Service fall intoCT9.2(c)(ii)’s “request for payment” category, the Court finds that CT9.2(c)(i)’s demand forpayment as a legal right and CT9.2(c)(ii)’s request for payment unambiguously provide fordifferent circumstances. Ambiguous contract terms do not exist simply on the basis that theparties assert different interpretations of the contract. Westinghouse Elec. Corp. v. United States,41 Fed. Cl. 229, 235 (1998) (citing Thermal Electronic, Inc. v. United States, 25 Cl. Ct. 671, 673(1992)). “While ‘[a]ny group of words can be twisted by strained construction into an ambiguity. . . this should not be done.’” Westinghouse Elec., 41 Fed. Cl. at 235 (quoting Dana Corp. v.United States, 200 Ct. Cl. 200, 470 F.2d 1032, 1043 (1972)).

In light of the terms’ ordinary, unambiguous meanings and the parties’ likely intent, thisCourt interprets the two subsections to refer to distinctly different actions taken under thecontract. Section CT9.2(c)(ii) refers to payments likely to occur in the ordinary course of theparties’ contractual relationship. However, subsection (c)(i) refers to demands for relief, as alegal right under the contract. Demands for relief as a legal right should be understood to includedemands for damages resulting from breach of contract. The Forest Service’s damagecorrespondence constituted written assertions of a legal right to damages pursuant to CT9.3(E)and CT9.2(c)(i).

Precision argues that requiring that there first be a dispute would facilitate efficientresolution of the claims at issue. However, interpreting the contracts as requiring a pre-existingdispute before one party’s demanded damages constitute a claim would prove “inimical to atleast two goals of the CDA: providing for the efficient and fair resolution of contract claims.” Reflectone, 60 F.3d 1572, 1580 (Fed. Cir. 1995) (citing Report of the Senate GovernmentalAffairs Committee and the Senate Judiciary Committee on the Contract Disputes Act of 1978, S.REP. NO. 95-1118, at 4 (1978), reprinted in 1978 U.S.C.C.A.N. 5235, 5238). The contractsexpressly provide for an efficient and fair resolution of breach and damage issues. Theprovisions discussed above detail both parties’ legal rights to terminate for breach andsubsequently demand damages. As such, the Forest Service’s written demand for breachdamages arising under the contract constituted a claim as defined in CT9.2(c)(i).

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III. CROSS MOTIONS FOR SUMMARY JUDGMENT

Precision sought summary judgment regarding the defendant’s counterclaim for damages,arguing that: 1) defendant’s prior material breach precluded the Forest Service from terminatingthe contracts based on Precision’s failure to furnish bonding from an approved surety; 2) theForest Service engaged in selective enforcement when it required Precision to obtain newbonding, while choosing not to terminate other contractors for failure to timely comply with thebonding provisions; and 3) the contracting officers’ computations of damages are inconsistentwith the parties’ contracts. Defendant also moved for summary judgment, contending that: 1)Precision breached the contracts; 2) Precision waived the defense of prior material breach bychoosing to continue performance; and 3) the contracting officers correctly calculated thedamages to the Government resulting from Precision’s breaches.

A. Standard for Summary Judgment

Summary judgment is appropriate when there are no genuine issues of material fact andthe moving party is entitled to judgment as a matter of law. RCFC 56(c); Anderson v. LibertyLobby, Inc., 477 U.S. 242, 247 (1986). A material fact is one that might significantly affect theoutcome of the litigation. Anderson, 477 U.S. at 248. A dispute over a material fact is “genuine”only if “a reasonable jury could return a verdict for the nonmoving party.” Id.

In considering a motion for summary judgment, the court does not “weigh” each side’sevidence. Process Control Techs. v. United States, 53 Fed. Cl. 71, 76 (2002) (citing ContessaFood Prods., Inc. v. Conagra, Inc., 282 F.3d 1370, 1376 (Fed. Cir. 2002)). Rather, “the courtviews the evidence and any disputed factual issues in the light most favorable to the partyopposing the motion.” Id. (citing Enzo Biochem, Inc. v. Gen-Probe Inc., 285 F.3d 1013, 1017(Fed. Cir. 2002)). The non-moving party has the burden of producing sufficient evidence thatthere is a genuine issue of material fact in dispute which would allow a reasonable finder of factto rule in its favor. Id. (citing Anderson, 477 U.S. at 256). Unsupported assertions or conclusoryallegations are insufficient to withstand summary judgment. SRI Int’l v. Matsushita Elec. Corp.,775 F.2d 1107, 1116 (Fed. Cir. 1985).

“The fact that both parties have moved for summary judgment does not mean that thecourt must grant judgment as a matter of law for one side or the other; summary judgment infavor of either party is not proper if disputes remain as to material facts.” Mingus Constructors,Inc. v. United States, 812 F.2d 1387, 1391 (Fed. Cir. 1987) (citing Houghton v. Foremost Fin.Servs. Corp., 724 F.2d 112, 114 (10th Cir. 1983)). “The court must evaluate each party’s motionon its own merits, taking care in each instance to draw all reasonable inferences against the partywhose motion is under consideration.” Mingus Constructors, 812 F.2d at 1391.

BT9.3(b) provided: “If such breach does not require on-the-ground action by Purchaser,6

such breach shall be remedied within 30 calendar days. . . . If such breach is not remedied withinthe above time limits, Forest Service may terminate this contract.”

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B. Precision Breached its Forest Service Contracts by Failing to Maintain Bondingwith an Approved Surety

The Government seeks a summary judgment that Precision breached the timber salecontracts at issue and therefore the Forest Service properly terminated the contracts for default. As stated in Gilbert v. Dep’t of Justice:

A party breaches a contract when it is in material non-compliance with the terms of thecontract. Link v. Dep’t of Treasury, 51 F.3d 1577, 1582 (Fed. Cir. 1995). . . . A [failureto comply] is material when it relates to a matter of vital importance, or goes to theessence of the contract. Thomas v. Dep’t of Hous. and Urban Dev., 124 F.3d 1439, 1442(Fed. Cir. 1997) (citing 5 Arthur L. Corbin Corbin on Contracts §1104 (1964)). Underthis formulation, the determination of whether non-compliance with the terms of acontract is material, so as to constitute a breach, is a mixed question of fact and law. What was required by way of contract performance turns on contract interpretation whichis an issue of law. Mass. Bay Transp. Auth. v. United States, 129 F.3d 1226, 1231 (Fed.Cir. 1997). At the same time, the conduct of the allegedly breaching party -- in otherwords, what the party did or did not do -- is an issue of fact.

334 F.3d 1065, 1071 (Fed. Cir. 2003). Because the facts regarding Precision’s failure to complywith the terms of the contract are undisputed, the determination of whether there was a materialnon-compliance with the terms of a contract, and hence breach, necessarily reduces to a questionof law. Id. Therefore, the determination of whether Precision breached the contract is properlydecided on summary judgment. See RCFC 56(c); Anderson, 477 U.S. at 247.

All of the contracts at issue in this action contained a section BT9.1, as follows:

Performance Bond. As a further guarantee of the faithful performance of the provisionsof this contract, Purchaser delivers herewith and agrees to maintain a surety bond in thedollar amount stated [in another section of the contract]. . . . Should the sureties on thebond delivered herewith, or any bond delivered hereafter in connection with this contract,become unsatisfactory to Forest Service, Purchaser shall, within 30 calendar days ofreceipt of demand, furnish a new bond with surety satisfactory to Forest Service.

Furthermore, the contracts provided in section CT9.3 that “[t]he Contracting Officer . . . mayterminate this contract for breach in the event Purchaser . . . (E) fails to remedy a breach ofcontract within time limits stated in BT9.3. 6

In 1999 and 2000, Precision used Frontier Insurance to comply with the bondingrequirement in section BT9.1. However, on June 6, 2000, the Department of the Treasury

Decisions of the boards of contract appeals are not binding on this Court, but can be7

persuasive where they are well reasoned and legally sound. 17

removed Frontier Insurance Company from its list of approved sureties. 65 Fed. Reg. 35998-02(June 6, 2000) (“with respect to any bonds . . . currently in force with [Frontier Insurance], bondapproving officers should secure new bonds with acceptable sureties”). Shortly thereafter, theForest Service notified Precision that Frontier Insurance Company was no longer an acceptablesurety and, pursuant to section BT9.1, directed Precision to obtain bonding from an acceptablesurety within 30 days.

Precision failed to remedy the breach within the 30-day time period. In July 2000, andagain in September 2000, Forest Service contracting officers wrote letters reminding Precisionthat its failure to provide replacement surety bonds constituted a breach of contract. In bothcommunications, the Forest Service offered Precision the opportunity to cure its default andwarned Precision that failure to cure within 30 days could result in the termination of its timbersale contracts for material breach. Precision still did not obtain an acceptable surety. On January9, 2001, the Forest Service notified Precision that it had terminated the contracts for breach onthe theory that Precision breached section BT9.1 of its timber sale contracts by failing tomaintain performance bonds from an approved surety. As a matter of law, this Court findsPrecision violated an express, unambiguous provision of the contracts and, therefore, thecontracting officers’ decisions to terminate for breach were justified under section BT9.3. SeeAbbett Elec. Corp. v. United States, 142 Ct. Cl. 609, 614, 162 F. Supp. 772, 775 (1958).

Looking past the unambiguous language of the contracts, the correctness of the decisionto terminate is supported by numerous decisions of the boards of contract appeals. These boards7

have found that “failure to furnish adequate bonding [as] required by a government . . . contractis a material breach that justifies termination for default.” Airport Indus. Park, Inc. v. UnitedStates, 59 Fed. Cl. 332, 334-35 (2004); see, e.g., Dieleman Constr. Co., ENG BCA No. 6213, 96-2 B.C.A. (CCH) ¶ 28,430, 1996 WL 419850, 1996 Eng. BCA LEXIS 12, at *22-23 (June 24,1996) (finding that failure to provide performance and payment bonds was the “proper legalbasis” for terminating appellant’s contract for default); Pac. Sunset Builders, Inc., ASBCA No.39, 312, 93-3 B.C.A. (CCH) ¶ 25,923, 1993 WL 89769, 1993 ASBCA LEXIS 90, at *7-8 (Mar.17, 1993) (stating that when sureties became unacceptable to Government, appellant’s failure toprovide adequate financial information justified termination of contract for default); JaMarConstr. Co., ENG BCA No. 5251, 87-3 B.C.A. (CCH) ¶ 20,125, 1987 WL 41310, 1997 Eng.BCA LEXIS 57, at *9 (Aug. 21, 1987) (finding a “material breach entitling the Government toterminate the contract for default” when the contractor’s surety went bankrupt and contractorcould not obtain substitute bonding).

Thus, the Court concludes that on the undisputed facts, Precision breached the twelve Forest Service contracts in issue by failing to maintain bonding with an approved surety.

Plaintiff’s prior material breach defense does not apply to the Gentry, Lily, and Wiggins8

contracts because those contracts were entered into after the suspension periods. Furthermore,Chief Judge Damich found that the Forest Service’s suspension did not breach the Hutch-Boondock multi-product sale contract, Precision Pine, 50 Fed. Cl. 35, so the defense is equallyinapplicable to that contract.

In Precision Pine, 98-720, the court did not reach the issue of whether breaches were9

“material” such that Precision would have been released from its obligations under the contracts. 50 Fed. Cl. 35.

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C. Precision Waived the Excuse of Prior Material Breach Through ContinuedPerformance

Precision asserts that the Forest Service’s termination for default is invalid due to theprior material breach by the Forest Service of eight of the twelve contracts at issue: O.D. Ridge,Brookbank, Jersey Horse, Saginaw-Kennedy, Brann, U-Bar, Monument, and Manaco. Precision8

alleges that the prior material breaches relieved it of its continued obligation to perform.

In attempting to excuse itself from liability, plaintiff invokes the principle of priormaterial breach: “Upon a material breach of a contract the non-breaching party has the right todiscontinue performance of the contract.” Stone Forest Indus., Inc. v. United States, 973 F.2d1548, 1550 (Fed. Cir. 1992); see also Malone v. United States, 849 F.2d 1441, 1446 (Fed. Cir.1988) (holding a material breach may allow the non-breaching party to avoid the contract,discharge its duties under the contract, and relieve it of a default determination and itsconsequences), modified, 857 F.2d 787 (Fed. Cir. 1985). However, even assuming that theForest Service’s suspensions constituted prior material breaches such that Precision might have9

been relieved of its obligations under the contracts, Precision waived any right to treat thebreaches in that manner by manifesting an understanding, through the continued fulfillment of itscontractual obligations, that performance was to continue under the contracts. As the Court ofClaims stated:

A material breach does not automatically and ipso facto end a contract. It merely givesthe injured party the right to end the agreement; the injured party can choose betweencanceling the contract and continuing it . . . . If he elects instead to continue the contract,the obligations of both parties remain in force and the injured party may retain only aclaim for damages for partial breach.

Cities Serv. Helex v. United States, 211 Ct. Cl. 222, 234-35, 543 F.2d 1306, 1313 (1976).

The case law in this Circuit has frequently analyzed and applied the doctrine of priormaterial breach. See, e.g., Barron Banshares, Inc. v. United States, 366 F.3d 1366, 1380-81(Fed. Cir. 2004); Alaska Pulp Co. v. United States, 48 Fed. Cl. 655, 668-71 (2001); Ling-Temco-Vought, Inc. v. United States, 201 Ct. Cl. 135, 144-50, 475 F.2d 630, 636-39 (1973); N. HelexCo. v. United States, 197 Ct. Cl. 118, 125-26, 455 F.2d 546, 551 (1972). As stated above, “Upon

19

a material breach of a contract the non-breaching party has the right to discontinue performance.” Stone Forest Indus., 973 F.2d at 1550. This principle presents a number of options for the non-breaching party, including whether to: 1) entirely discontinue performance under the contract, 2)explicitly reserve its right to discontinue performance for the material breach, or 3) waive theright and continue performance under the contract. Several authorities analyze the legal standardfor application of the defense of prior material breach. Professor Williston’s treatise describesthe defense as a rigid doctrine whereby after a material breach, the non-breaching party has thechoice to continue to perform under the contract or to cease to perform, and any conductindicating an intention to continue the contract will constitute a conclusive election, in effectwaiving the right to assert that the breach discharged any obligation to perform. See 14WILLISTON ON CONTRACTS § 43:15 (4th ed. 2000). The RESTATEMENT (SECOND) OF

CONTRACTS § 246(1) states that “an obligor’s acceptance or his retention for an unreasonabletime of the obligee’s performance, with knowledge of or reason to know of the non-occurrence ofa condition of the obligor’s duty, operates as a promise to perform in spite of that non-occurrence.” RESTATEMENT (SECOND) OF CONTRACTS § 246(1). Additionally, ProfessorCorbin’s treatise and the Uniform Commercial Code have articulated and endorsed additionalvariations of the legal standard for analyzing the effect of prior material breach.

In Cities Service, the Court of Claims summarized the four approaches for determiningwhether a party’s conduct indicated an election to continue performance: (1) the Williston, strictformulation under which “any act indicating an intent to continue the contract is an election[,] . . .the right to end the contract cannot be preserved[, and] . . . any inconsistent act results in the lossof the right;” (2) the modified approach, articulated in Northern Helex, 197 Ct. Cl. at 125-26, 455F.2d at 551, under which “the injured party may itself continue performance in certaincircumstances and yet reserve its right to claim material breach without the breaching party’sassent;” (3) Professor Corbin’s approach, under which “an election should not be conclusiveunless facts giving rise to an estoppel exist[:] either the breaching party must have changed hisposition in reliance on the injured party’s failure to cancel or the injured party’s conduct must besuch that it would be unjust to allow him to change his position;” and (4) the UniformCommercial Code approach, under which the question of “[w]hether the pursuit of one remedybars another depends entirely on the facts of the individual case.” Cities Serv., 211 Ct. Cl. at 235-36, 543 F.2d at 1314; see 5 S. WILLISTON, A TREATISE ON THE LAW OF CONTRACTS §§ 683-88(W.H.E. Jaeger ed., 3d ed. 1957); U.C.C. § 1-207 (2002); see also First Heights Bank v. UnitedStates, 51 Fed. Cl. 659, 664 (2001).

The parties’ dispute lies in whether Precision sufficiently reserved its right to discontinueperformance of the eight contracts, identified supra at 3, 18, after the Government’s 1995-1996breaches or whether the actions taken by Precision after the breaches constituted an election tocontinue performance and therefore a wavier of the defense with respect to those contracts.

Under the Williston formulation, Precision undoubtedly waived its right to discontinueperformance. Rather than treating the Government’s suspensions as material breaches, Precisioncontinued performance, to varying degrees, under each of the eight contracts after thesuspensions were lifted. Most notably, Precision actually harvested timber on seven of the eightbreached contracts. Furthermore, after the suspensions were lifted, Precision executed contract

Such communications included: annual operating schedules submitted by Precision for10

some of the contracts, a request to log outside of the “normal operating season,” requests to openpayment units, and concerns about market conditions for harvesting.

20

modifications on the eight breached contracts, acquired new bonding (or the contractuallyallowed Letter of Credit) for all eight of the breached contracts, met with the Forest Serviceregarding two of the contracts, and continued contractually required communication on all eight10

breached contracts. See PRDPF at 8-12.

Precision fares no better under the second approach described in Cities Service. Themodified position, first adopted in Northern Helex, “allowed a plaintiff to claim a material,contract-ending breach – despite having continued performance – only in the context of thatplaintiff’s explicit reservations of material breach claims, explanations in advance of the reasonsfor its continued performance, prompt suit before the Government took any action to terminate,the lack of prejudice to the Government, and other special factors.” Cities Serv., 211 Ct. Cl. at235-36, 543 F.2d at 1314 (citing N. Helex, 197 Ct. Cl. 118, 455 F.2d 546). While Precisionattempts to analogize its situation to the “particular circumstances” that gave rise to the modifiedapproach in Northern Helex, the differences in the two cases far outweigh the similarities. Themost glaring distinction comes from Northern Helex’s emphasis that “plaintiff’s continuedperformance . . . was founded on the required reservation.” 197 Ct. Cl. at 118, 455 F.2d at 552(emphasis added). The court in Northern Helex noted the language in a letter from the plaintiffinforming the Government that its failure to make payment was “a material default under thecontract . . . [and plaintiff] wish[ed] to reiterate that any performance rendered by Northern HelexCompany subsequent to any such defaults has been and shall be with the express understandingthat such action shall not constitute a waiver of any of Northern Helex Company’s rights andremedies.” 197 Ct. Cl. at 118, 455 F.2d at 552.

Unlike in Northern Helex, plaintiff’s continued performance under the contracts at issuehere was not founded on any reservation of plaintiff’s right to discontinue performance. 197 Ct.Cl. at 118, 455 F.2d at 552. Precision argues that it informed the Forest Service from the outsetand throughout the suspension that it considered the Forest Service to be in breach of itscontracts. Pl. Resp. to Def. Mot. for Summ. J. at 24; PPFUF 1-2. Throughout this period,however, plaintiff failed to notify the Forest Service that it considered the breaches to bematerial. Cities Serv., 211 Ct. Cl. at 237 n.19, 543 F.2d at 1315 n.19 (noting that “[i]nsofar asplaintiffs may have implied that the termination amounted to a breach of contract, they never saidor implied that it was a material breach ending the entire contract”). During the performance ofthe contract, Precision never notified the Forest Service that it continued to reserve its right toterminate for the Government’s material breach. Rather, as evidenced by Precision’s actionsdiscussed above, Precision expressed only an intent to continue efforts to perform under the eightbreached contracts until after the Government had terminated the contracts for breach.

Precision’s counsel sent the Government a letter on January 12, 2001, three days after theForest Service’s termination for default of all the contracts at issue. The letter notified the ForestService, for the first time, that Precision considered the Government’s prior material breach to

Precision initially asserted prior material breach with respect to the nine contracts at11

issue in this case that were the subject of a suspension by the Forest Service, i.e., O.D. Ridge,Brookbank, Jersey Horse, Saginaw-Kennedy, Brann, U-Bar, Monument, Manaco, Hutch-Boondock. Chief Judge Damich subsequently found that the Government breached only eight ofthose contracts. See supra at 3; Precision Pine, 50 Fed. Cl. 35 (holding that the Forest Service’ssuspension of the Hutch-Boondock contract did not result in a breach); See also supra at 18 n.8.

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have relieved it of liability for nine of the defaults and reserved its right to make this argumentonce the issue of breach was resolved by the Court in Precision Pine & Timber, Inc. v. UnitedStates, No. 98-720C. This Court concludes, however, that Precision could not, as a matter of11

law, reserve the right to terminate for the Government’s prior material breach three years after itsoccurrence, two days after the contracts had been terminated by the Government for Precision’sown breach of its express contractual obligations, and after a three-year period in which Precisionmanifested an understanding that performance under the contracts at issue was going to continueand during which plaintiff failed to make the “required reservation.” N. Helix, 197 Ct. Cl. at 118,455 F.2d at 552. One side cannot continue performance after a material breach by the other, actas if the contract remains fully in force, and then only raise the defense of prior material breachwhen it has been terminated for its own default. N. Helex, 197 Ct. Cl. 118, 455 F.2d at 551.

Plaintiff attempts to further its argument with reference to the “Hobsonian” choicediscussed in Alaska Pulp, 48 Fed. Cl. at 671. Pl. Resp. at 27. In Alaska Pulp, the court rejectedthe Government’s attempt “to force the non-breaching party to choose between swallowing the[Government’s violation of the contract] or abandoning the contract entirely, a Thomas Hobson’schoice that would reward the breaching party and add further injury to” the non-breaching party. Alaska Pulp, 48 Fed. Cl. at 671. Unlike the actions taken by Precision, however, Alaska Pulp“consistently maintained that the [Government’s violation of the contract] constituted a materialbreach of its . . . contract,” and the Government was well aware “that [Alaska Pulp] stillcontemplated the option of a legal claim for repudiation.” Id. The Court also found that AlaskaPulp “adequately preserved its repudiation theory in its dealings with the contracting officer andForest Service representatives” by “establish[ing] repudiation facts and plainly characteriz[ing]the imposition of the unilateral terms as a material breach excusing further performance on itspart.” Id. at 669. In its briefs, Precision ignores these determinative facts.

Under the Corbin view, an election is binding if the breaching party changes his positionin reliance on the non-breaching party’s continued performance, or if the injured party’s conducthas been such that it would be unjust to allow him to change his position. Cities Serv., 211 Ct.Cl. at 241, 543 F.2d at 1317. Precision waited until just under four years from the lifting of thelast suspension and until after being terminated for default itself, to notify the Forest Service ofits asserted right or decision to abandon the contracts by reason of the Government’s priormaterial breach. In light of Precision’s continued manifestation of its intention to perform underthe contracts and the lack of timely notice to the Forest Service regarding Precision’s assertion ofmaterial breach, this Court concludes that it would be unjust under the circumstances to allowPrecision to avoid liability for its breaches based on the assertion of prior material breach.

Precision did not have an alternative source of timber at the time. Additionally, if12

Precision had simply walked away from its contracts, the Government could have terminated thecontract for default, suspended or debarred Precision from bidding on future timber salecontracts, or deemed Precision to be a non-responsible contractor – a designation that wouldpreclude Precision from winning future contracts. Pl. Resp. to Def. Mot. for Summ. J. at 11-13.

There is no suggestion that Precision has waived its right to claim damages for the13

Government’s breach. In fact, as early as 1998, Precision brought suit against the United Statesin Docket No. 98-720C, pursuing a monetary remedy for the Forest Service’s suspensions.

22

Essentially the same reasoning applies when one analyzes the case under the UCCapproach: “Whether the pursuit of one remedy bars another depends entirely on the facts of theindividual case.” U.C.C. § 2–703 cmt. 1. The facts of this case are such that the Courtrecognizes that complete cancellation of the contracts posed substantial risks for Precision, but12

the law of election requires the non-breaching party to, at the very least, reserve the right tocancel the contract by notifying the non-breaching party of its reserved right to cancel later. Thisposition is supported by Cities Service’s recognition that the UCC requires, “prompt and specificaction to preserve rights and remedies in various situations and suggests that affirmative action isnecessary when a seller wishes to cancel for the buyer’s breach.” 211 Ct. Cl. at 242 n.29, 543F.2d at 1317 n.29 (citing UCC §§ 2-602(1), –606(1)(b), –607(3), – 608(2), –616, –703; 2 R.Anderson, Uniform Commercial Code § 2–703:35 (1971) (when seller elects to cancel, it is clearthat he should manifest intention to do so; Code does not establish method of cancellation, sopre-Code law governs)). Precision’s actions in waiting almost four years cannot be construed as“prompt and specific” as those terms were used in Cities Service.

Under any standard, Precision waived its right to cancel the contracts based on theGovernment’s alleged prior material breach through its continued manifestation of anunderstanding that the contracts remained in effect by continuing to fulfill its contractualobligations. Through this continued manifestation of intention to perform under the contracts,after the Forest Service’s prior breaches, Precision waived the right to be shielded from its ownliability for breach of the contracts. 13

D. Purported Selective and Unequal Enforcement Does Not Excuse Precision’s Breach

The Government has moved for summary judgment regarding Precision’s asserted claimthat once Frontier Insurance was delisted by the Department of the Treasury, “the Forest Serviceselectively enforced the bonding requirement among companies that had previously securedbonding from Frontier Insurance Company.” Compl. ¶¶ 18-21. On summary judgment, indeciding whether there are genuine issues of material fact, the Court must determine (1) whetherthe non-moving party has presented evidence in its opposition that creates a genuine issue ofmaterial fact; or (2) whether the non-moving party has relied solely on unsupported allegationsand/or denials. See McDonald v. United States, 13 Cl. Ct. 255, 258 (1987). “Where the non-moving party merely asserts unsupported allegations and conclusions, the court will not deny the

23

moving party’s motion for summary judgment if the moving party meets his burden under RCFC56(c).” Id. (citing Celotex Corp. v. Catrett, 477 U.S. 317 (1986)). “The burden ‘on the movingparty may be discharged by ‘showing’– that is by pointing out to the . . . Court – that there is anabsence of evidence to support the non-moving party’s case.’” McDonald, 13 Cl. Ct. at 258(quoting Celotex, 477 U.S. at 325).

Plaintiff supports its assertion of “selective and unequal enforcement” by reference to “awell-established principle of law that a ‘party vested with contractual discretion must exercise hisdiscretion reasonably and may not do so arbitrarily or capriciously.’” American Exp. IsbradstenLines, Inc. v. United States, 204 Ct. Cl. 424, 464, 499 F.2d 552, 576 (1974) (quoting Pac. Far E.Line, Inc. v. United States, 184 Ct. Cl. 169, 184, 394 F.2d 990, 998 (1968)). While plaintiffstyled the argument in its briefs as “selective and unequal enforcement,” at oral argumentplaintiff seemed to argue based upon the disparate treatment terminology used in theGovernment’s briefs. In light of the fact that neither of the cases cited by plaintiff deal with acontract termination and plaintiff’s use of the disparate treatment terminology at oral argument,this Court treats plaintiff’s claim of “selective and unequal enforcement” as an allegation ofdisparate treatment.

An allegation that one company was treated differently from another “does not, ipso

facto, state an actionable claim” of disparate treatment. Asco-Falcon II Shipping Co. v. UnitedStates, 32 Fed. Cl. 595, 604 (1994). Plaintiffs must show a breach of contractual obligation. Id. (emphasis in original). As the obligation of good faith and fair dealing is implied in these andevery contract, a breach of that obligation would be relevant. See, e.g., Process Control, 53 Fed.Cl. at 81; Asco-Falcon, 32 Fed. Cl. at 604-05. “[T]he government has an ever present obligationto perform its duties under a contract reasonably and in good faith . . . . However, it is well-settled that government officials are presumed to act . . . in good faith in the discharge of theirduties.” Asco-Falcon, 32 Fed. Cl. at 604 (citing Spezzaferro v. Fed. Aviation Admin., 807 F.2d169, 173 (Fed. Cir. 1986)); Torncello v. United States, 681 F.2d 756, 770 (1982); Kalvar Corp. v.United States, 543 F.2d 1298, 1301 (1976)). Therefore, “[t]o establish a breach of the duty ofgood faith and fair dealing a “plaintiff[] must allege and prove, by clear and strong evidence,specific acts of bad faith on the part of the government . . . . ‘with well nigh irrefragable proof.’” Asco-Falcon, 32 Fed. Cl. at 604 (citing Cont’l Collection & Disposal, Inc. v. United States, 29Fed. Cl. 664, 652 (1993) (citing Kalvar, 543 F.2d at 1301-02)). “Irrefragable proof has in turnbeen equated with evidence of ‘a specific intent to harm.’” Kalvar, 543 F.2d at 1302; see alsoTorncello, 681 F.2d at 770. Consequently, “alleged disparate treatment absent a [showing] ofmalice or intent to harm” is insufficient to survive a motion for summary judgment. Asco-Falcon, 32 Fed. Cl. at 604-05; see also CACI, Inc. v. United States, 719 F.2d 1567, 1582 (Fed.Cir. 1983) (holding that an intent to injure must be proved with “hard facts” and that “suspicionand innuendo” do not suffice).

First, the Government correctly asserts that Precision has failed to establish a genuineissue of material fact regarding an essential element of its claim. Precision has made no morethan conclusory allegations of the Forest Service’s malice or intent to harm. Precision has notproduced any evidence showing that the terminations of the contracts were motivated by maliceor an intent to harm. In opposition to the Government’s motion for summary judgment on the

http://web2.westlaw.com/find/default.wl?DB=708&SerialNum=1986132677&FindType=Y&AP=&RS=WLW4.06&VR=2.0&FN=_top&SV=Split&MT=Westlaw

http://web2.westlaw.com/find/default.wl?SerialNum=1986132677&FindType=Y&AP=&RS=WLW4.06&VR=2.0&FN=_top&SV=Split&MT=Westlaw

Stone Container Corp. d/b/a Stone Forest Industries.14

Gov’t Supp. App. at 15-17 contains Stone Container Corp.’s replacement performance15

bonds, executed by Gulf Insurance Company.24

disparate treatment allegation, Precision has put forth only a declaration from the President ofNorth Pacific Timber Enterprises (“North Pacific Timber”) and counsel’s oral argumentallegations of “incredibly aggressive action” by the Forest Service. First, the declaration does notpurport to establish malice or intent to injure by the Government. The declaration is alsoinsufficient because the comparison necessary for determining the possibility of disparatetreatment is between similarly situated competitors. See Asco-Falcon, 32 Fed. Cl. at 604. Plaintiff makes no attempt to show that Precision and North Pacific Timber were similarlysituated such that the Government’s purportedly disparate treatment could excuse Precision’sdefault.

Moreover, even if plaintiff could show a difference in the Forest Service’s treatment ofPrecision and North Pacific Timber regarding the replacement of performance bonds, plaintiffhas failed to establish a genuine issue of material fact with respect to a breach by the Governmentof the duty of good faith and fair dealing. Precision has not shown that the Forest Servicepossessed a specific intent to harm. The conclusory allegations by Precision’s counsel of“aggressive action” by the Forest Service against Precision are themselves insufficient topreclude summary judgment. See McDonald, 13 Cl. Ct. at 258; Vanmoor v. Wal-Mart Stores,Inc., 201 F.3d 1363 (Fed. Cir. 2000) (noting party proffered no evidence in support of hisconclusory allegations and therefore failed to establish a genuine issue of material fact).

Next, the Government provided evidence that the Forest Service made the samereplacement requirements of another timber company , operating in the same region, and also14

bonded by Frontier Insurance. In the Government’s Supplemental Appendix, filed May 10,2004, it submitted letters from a Forest Service contracting officer regarding the June 6, 2000Treasury de-listing of Frontier Insurance. The substance of the letters is similar to those sent toPrecision after the same Treasury Notice. As with Precision, the other company, Stone ContainerCorp., was informed of the need to obtain performance bonding from a new surety. Def. Supp.App. 10, 12. Unlike Precision, by October 13, 2000, Stone Container had complied with theForest Service’s request and obtained new bonding. 15

The Court also takes note of the discretion provided by the Department of the Treasury tothe Forest Service contracting officers in its instructions regarding the termination of FrontierInsurance Company as a surety acceptable on federal bonds. The Treasury Notice stated, “Withrespect to any bonds, including continuous bonds, currently in force with [Frontier Insurance],bond approving officers should secure new bonds with acceptable sureties in those instanceswhere a significant amount of liability remains outstanding.” 65 Fed. Reg. 35998-02. Precisiondoes not sufficiently support its claim of disparate treatment because it never asserts that NorthPacific Timber had a similar amount of liability remaining outstanding. In this regard, theTreasury Department’s Notice sanctioned “disparate” treatment by reference to the amount of

25

liability that remained outstanding.

In light of the foregoing, this Court concludes that the Government is entitled to judgmentas a matter of law with respect to plaintiff’s assertion of selective and unequal enforcement ordisparate treatment. Accordingly, the Court grants the Government’s motion for summaryjudgment on its counterclaim with respect to liability.

E. The Damage Calculation is Remanded to the Contracting Officers

The parties have filed cross motions for summary judgment regarding the contractingofficers’ damage calculations. Precision contends that the contracting officers’ computations ofdamages are inconsistent with the parties’ contracts. Specifically, Precision contends that theForest Service ignored the relevant contractual provision and created a new method ofcalculating damages. Conversely, the Government contends that the damages were calculated inaccordance with the relevant provision of the contract and therefore there are no issues left fordetermination at trial with respect to the amount of damages due to the United States fromPrecision. As previously stated, the interpretation of provisions of a government contract is amatter of law. Grumman Data Sys. Corp. v. Dalton, 88 F.3d 990, 997 (Fed. Cir. 1996); see alsoAlaska Lumber & Pulp Co. v. Madigan, 2 F.3d 389, 392 (Fed. Cir. 1993).

Each of the contracts contained the following section CT9.4 describing the method forcalculating damages in the event of termination for breach:

CT9.4 - FAILURE TO CUT. In the event of (a) termination for breach or (b)Purchaser’s failure to cut designated timber on portions of Sale Area by TerminationDate, Forest Service shall appraise remaining Included Timber . . . . Such appraisal shallbe made with the standard Forest Service method in use at time of termination.

Damages due the United States for Purchaser’s failure to cut and remove Included Timbermeeting Utilization Standards shall be the amount by which Current Contract Value, pluscosts described below, less any Effective Purchaser Credit remaining at time oftermination, exceeds the resale value at new Bid Rates. If there is no resale, damages dueshall be determined by subtracting the value established by said appraisal from thedifference between Current Contract Value and unused Effective Purchaser Credit, plusany of the following applicable costs:

(a) The cost of resale or reoffering;

(b) Any increase in Purchaser Credit Limit allowance for Unconstructed SpecifiedRoad facilities which are needed to harvest the remaining uncut volume. Suchincreases are limited to costs for constructing the road to the same standard andspecifications required by this contract;

(c) If Purchaser has failed to cut individual trees in the portions of Sale Areacutover and there is no resale of such individual trees, Purchaser shall pay Forest

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Service for cost of felling and removal or otherwise eliminating such uncut treesin addition to payment of damages described above . . . .

(d) The Government’s loss caused by the delay in receipt of stumpage payments. Such loss will be measured by interest at the current rate being paid for borrowingby the United States (as calculated and published by the Treasury Department inTFRM 6-8025.2) on the unpaid contract value at Termination Date. Interest willbe charged for the total number of months, or portions thereof from TerminationDate until midpoint of the contract resale period, less any time in excess of 1 yearneeded to make the resale;

(e) Any increase in reforestation costs, including site preparation, seeding, andplanting caused by Purchaser’s failure to harvest Included Timber by TerminationDate.

In interpreting provisions of an agreement the “primary function of the court is toascertain the intent of the parties to a contract.” Northrop Grumman, 50 Fed. Cl. at 458; Alvin,Ltd. v. United States Postal Serv., 816 F.2d 1562, 1565 (Fed. Cir. 1987) (“[I]n the case ofcontracts, the avowed purpose and primary function of the court is the ascertainment of the intentof the parties”) (quoting 4 S. WILLISTON, supra at 19, § 601). The intention of a party enteringinto a contract is determined by an objective reading of the language of the contract, not by thatparty’s statements in subsequent litigation. Varilease Tech. Group, 289 F.3d at 798. “‘Contractinterpretation begins with the plain language of the agreement.’” Gould, Inc. v. United States,935 F.2d 1271, 1274 (Fed. Cir. 1991) (quoting Arizona, 216 Ct. Cl. at 235-36, 575 F.2d at 863). The language of the “contract must be given that meaning that would be derived from thecontract by a reasonable intelligent person acquainted with the contemporaneous circumstances.” Olympia Props., L.L.C. v. United States, 54 Fed. Cl. 147, 152 (2002) (quoting Hol-Gar Mfg., 169Ct. Cl. at 388, 351 F.2d at 975). Moreover, words are to be given their plain and ordinarymeaning. Id. (citing Thanet Corp. v. United States, 219 Ct. Cl. 75, 82, 591 F.2d 629, 633 (1979). An interpretation that “gives a reasonable meaning to all parts of a contract will be preferred toone which leaves a portion of it useless, inexplicable, inoperative, void, insignificant,meaningless, superfluous, or achieves a weird and whimsical result.” Northrop Grumman, 50Fed. Cl. at 459.

The Court begins its assessment of the likely intent of the parties by attempting toascertain the plain meaning of the contract. Gould, 935 F.2d at 1274. In doing so, the Courtfinds that the section CT9.4 provides two alternative methods for determining damages in theevent of breach: one where the timber has been resold; and the other where the timber has notbeen resold. Under the first method (i.e., where there has been a resale) damages “shall be theamount by which Current Contract Value, plus costs described below [in subparagraphs (a)through (e) of CT 9.4], less any Effective Purchaser Credit remaining at the time of termination,exceeds the resale value at new Bid Rates.” Under the second method (i.e., where there has beenno resale) “damages due shall be determined by subtracting the value established by [the ForestService appraisal described in the first paragraph of section CT9.4] from the difference betweenCurrent Contract Value and unused Effective Purchaser Credit, plus any of the following

See supra at 5 n.5.16

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applicable costs [in subparagraphs (a) through (e) of CT9.4].”

At the time of the contracting officers’ decisions in early 2001, no timber upon any of thebreached contracts had been resold. Rather than employ the method applicable when there hasbeen no resale, however, the Government created and employed a third method. Under thatapproach, the Government estimated the proceeds and costs of a possible future resale andutilized those estimated proceeds and costs as the basis for calculating something called“estimated damages.” Each of the contracting officers’ decisions stated, “This estimate may beadjusted once final damages are determined following the resale of the remaining timber. At thattime, any surplus damages collected by this estimate will be refunded to the purchaser, or anyadditional damages due will be collected, as appropriate.” The Government’s third method,16

however, is not permitted by the plain language of the contract.

A reasonable, intelligent person, acquainted with the contemporaneous circumstances,would likely understand CT9.4 to provide the Forest Service with only the two options describedabove for ascertaining the amount of damages due after a termination for breach. The Courtbelieves the parties would have more clearly stated their intent to adopt a methodology wherebydamages to be incurred due to a resale were estimated before any resale ever took place, if indeedit ever did. Section CT9.4 simply does not provide for the assessment of estimated damagesbased on a possible future resale, plus an estimated cost of resale and an estimated amount ofinterest, subject to reassessment after an actual resale. Thus, the Court concludes that sectionCT9.4 does not provide the Government the right to be paid an interim assessment of estimateddamages which will later be adjusted once the Government determines its actual damages. Rather, the contracts require the Forest Service to decide whether to resell the contract and waituntil the resale is concluded to calculate damages or not to resell the contract and calculate thedamages immediately.

The Government has advised the Court (and Precision agrees) that since the date of therespective contracting officers’ decisions, the Forest Service has, in fact, resold timber upon theO. D. Ridge, Jersey Horse, and Wiggins contracts. See Pl. Resp. to Def. Additional ProposedFindings of Undisputed Fact at 4. With respect to those contracts, the Government has requesteda remand to the Forest Service so that the contracting officers can recalculate damages in light ofthe post-termination resale. The Court will grant that request and will direct the Forest Service torecalculate the damages it asserts with respect to plaintiff’s breach of those three contracts inlight of the subsequent resales in a manner consistent with the Court’s interpretation, as set forthabove, of the method for calculating damages required by section CT9.4 where there has been aresale.

The Government has also represented (and Precision agrees) that the remaining ninecontracts were not resold and are not intended to be resold. See id. at 3. In view of the Court’sconclusion that the Forest Service’s calculation of “estimated damages” for breach of thosecontracts was not in accordance with the governing contractual provision, CT9.4, the Court will

The Court understands that using the Forest Service’s “estimated damages” approach,17

which the Court has determined is not authorized by the contract, the Forest Service concludedthat no “estimated damages” were due with respect to the Brookbank Multi-Product Sale and theManaco Timber Sale. It may be that recalculations with respect to those contracts in a mannerconsistent with the Court’s interpretation of the method for calculating damages required bysection CT9.4 where there is no resale will yield similar results. Out of an abundance of caution,however, the Court has remanded the damage determinations for those contracts to the ForestService as well.

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also remand those nine contracts to the Forest Service for recalculation of damages attributable toplaintiff’s breach and will direct the Forest Service to recalculate the damages it asserts in amanner consistent with the Court’s interpretation, as set forth above, of the method forcalculating damages required by section CT9.4 of the contract where there is no resale. See 28U.S.C. § 1491(a)(2); RCFC 56.2.

CONCLUSION

Having concluded, for the reasons set forth above, that the Forest Service improperlycalculated the damages it seeks by reason of plaintiff’s breach with respect to each of the twelvecontracts at issue, the Court DENIES the motion of defendant for summary judgment insofar as itrelates to the calculation of damages. The Court GRANTS plaintiff’s motion for summaryjudgment regarding the calculation of damages insofar as the Court holds that the contractingofficers’ computations of damages are inconsistent with the parties’ contracts and REMANDSthe damage determinations for those twelve contracts to the Forest Service for recalculationconsistent with the foregoing analysis. The Court ORDERS that: 1) the Government shall17

complete such recalculations within six months from the date of this Opinion and Order; 2)during such six-month period the Government shall file and serve status reports every thirty days,beginning thirty days from the date of issuance of this Opinion and Order, describing the status ofthe Forest Service’s progress in making the recalculations; 3) at or before the end of the six-month period, the Government shall file and serve the recalculations together with a briefdescribing the methodology used in each recalculation and explaining how it is consistent withCT9.4 as interpreted by the Court. The Court will then consider, in consultation with the parties,what further proceedings may be warranted so that the Court may resolve any challenges byplaintiff to the recalculations with a view toward entering a final judgment in this action. In themeantime, further proceedings in this Court shall be stayed pending the filing and service of therecalculations to be conducted pursuant to the Court’s remand.

IT IS SO ORDERED.

s/ George W. Miller

GEORGE W. MILLERJudge

in the united states court of federal claims · 5 the damage demands for the manaco timber sale and...

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